Slovenian government adopts "Lex Mercator"

By bne IntelliNewsApril 14, 2017

The Slovenian government adopted the so-called ‘Lex Mercator’ - a bill designed to prevent the diversion of funds from systemically important companies - on April 13.

The decision comes amid unconfirmed speculation that Croatian conglomerate Agrokor has been diverting funds from its Slovenian subsidiary Mercator. Agrokor was engulfed by a debt crisis earlier this year, and new management is being appointed to handle the restructuring of the food and retail group.

Economy Minister Zdravko Pocivalsek told Ljubljana reporters on April 13 that the law would apply to companies with more than 6,000 workers and over €1bn in net sales revenue, Slovenian Press Agency (STA) reported. According to the news agency, there are only two companies in Slovenia meeting both criteria: Mercator and home appliances maker Gorenje, and the latter has a dispersed ownership and no single majority owner.

"Mercator's operations are currently stable. We don't want to upset anyone or create the impression that jobs in Slovenia are at risk," Pocivalsek said.

The law was announced just two days after Pocivalsek said the government would protect Slovenia's largest retailer by law if necessary in order to preserve jobs and its Slovenian operations. On the same day Prime Minister Miro Cerar said Mercator must not be allowed to fail due to the problems of its parent company Agrokor given its importance as Slovenia's biggest employer and its relevance to Slovenian suppliers, STA reported.

Similar legislation was recently adopted by the Croatian government, which is also concerned about the impact of the crisis at Agrokor on the economy.

The issue is politically sensitive in Slovenia, where many people are opposed to foreign ownership of major companies. After Agrokor's takeover of Mercator in 2014, some Slovenian shoppers even switched to other retailers.

According to the draft Slovenian legislation, if the majority owner of such a firm is in insolvency procedures, the government will have the power to appoint a temporary crisis manager in charge of deals with the majority owner.

The crisis manager would not have the power to manage other transactions, which Pocivalsek said would ensure the legislation does not interfere with freedom of enterprise, STA reported.

The bill stipulates that in appointing a crisis manager, the government would first issue a decree determining that the majority owner could threaten the economic, social and financial stability of the country due to insolvency. The proposal would be put to the Ljubljana District Court.

The company would not be allowed to give its majority owner or its associates any guaranties, sureties, loans or advances without the crisis manager's clearance, or take on the majority owner's debt. It would have to report on all transactions with the majority owner every three months.

The crisis manager would be relieved of their duties by the court at the request of the government once the majority owner's insolvency procedure was complete or the company was longer associated with the owner.

The bill will be fast-tracked through parliament and can be activated at any time.

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